Betfair has pulled out of the German market after a newly imposed tax levy on sports betting made its online operations there unprofitable.

The group argues that because it operates as an exchange, the 5 per cent tax on stakes is unfair. Its punters trade in and out of positions rapidly so what they wager is actually far less than the actual stakes the tax authorities claim.

It said Germany accounted for around 4 per cent of its revenues last year and £6m of operating profits. But analysts warned the group could face a further bill for £20m-25m if it is forced to pay the tax on bets placed in Germany between the start of July and now.